Tough decisions left ahead for US energy reform bill

Sept. 11, 2002
US House and Senate lawmakers resume negotiations Sept. 12 on sweeping energy reform legislation.

By OGJ editors

WASHINGTON, DC, Sept. 11 -- US House and Senate lawmakers resume negotiations Sept. 12 on sweeping energy reform legislation.

Conference Chairman Billy Tauzin (R-La.), chairman of the House Energy and Commerce Committee, has tried to beat back growing pessimism that consensus can't be reached before the congressional calendar ends for the year.

Votes are anticipated soon on relatively noncontroversial items, such as pipeline safety legislation and energy efficiency. During this latest energy bill markup, members will be allowed to comment on the other more prominent pieces in the bill, such as industry access to the Arctic National Wildlife Refuge coastal plain, clean fuel guidelines, and energy tax proposals.

Oil and gas trade associations meanwhile are engaged in a concerted effort to keep the legislation a top public policy priority in the minds of lawmakers and the public.

Other issues
The Independent Petroleum Association of America, for example, stressed that irrespective of ANWR, there is a plethora of items of interest to their members.

Tax reform is a key item on the immediate agenda, IPAA said. Other examples include reduced royalties for marginal production when prices are low, a permanent royalty-in-kind program, resolving regulation of hydraulic fracturing under the Safe Drinking Water Act, limited royalty incentives for water depths of 400 m. and greater, and a study on the impact of incentives for offshore and onshore production.

Other items of interest to producers include a House provision that gives companies a credit against royalties for preparing environmental analyses for leases. Those analyses are in theory the responsibility of the federal government but in practice are often shouldered by industry to help speed the practice along, producers said.

Another important item present only in the Senate bill would release companies from certain lease acreage caps; changing the caps could encourage more production and streamline lease management, supporters of the provision say.

IPAA Chairman Diemer True acknowledged that some important issues, such as land access, will always be the target of litigation. Nevertheless, he argued that at a minimum for national security reasons Congress and the White House should pursue policies that encourage more domestic production.

True said he anticipates that a 2003 update of the 1999 National Petroleum Council study on natural gas supply and demand would further highlight the need for energy legislation designed to encourage domestic supply.

True predicted that researchers may find even more untapped potential in public lands that are now severely restricted or off-limits to industry. The 1999 report was prepared in response to a request from the secretary of energy to provide advice on the potential contribution of natural gas in meeting the US's future economic, energy, and environmental goals. The primary focus of the study was to test supply and delivery systems against significantly increased demand.

Pipeline safety
One issue expected to be resolved sooner rather than later is pending pipeline safety legislation.

Both the House and Senate passed legislation reauthorizing pipeline safety rules. Pipeline companies prefer the House version, (which is separate, stand-alone legislation and is not technically in the House energy bill (OGJ Online, July 25, 2002).

That bill includes what industry views as more flexible inspection timeframes and streamlined permitting option.
In the Senate version, companies support the adoption of a modified provision regarding community right-to-know, which industry says has been adjusted to shield security-sensitive information from public release.

Other pipeline issues
Pipeline companies also called on lawmakers to support a new Alaska gas pipeline that would transport North Slope gas to the Lower 48.

The Interstate Natural Gas Association of America also endorsed the "southern" route along the Alaska Highway that has been sought by key congressional lawmakers, arguing that such a route will have the best chance of being built, despite opposition from the Canadian government and some North Slope producers, who do not want to be told where to build the line.

The Senate bill includes incentives such as a loan guarantee and a floor price to encourage the construction of the line, but its potential cost could be a stumbling block.